Google, Warner Sign Deal And YouTube Gets Madonna Back

NEW YORK (AdAge.com) -- Warner Music Group has completed a deal with YouTube (GOOG) that will bring back music videos for Green Day, U2, Madonna and other artists to the video-sharing site from which they were removed in December, according to two executives familiar with the talks.

The completion of Warner's YouTube deal, which has not been officially announced, opened the door to more serious Vevo discussions, the executives said. YouTube and Warner declined to comment, citing the confidentiality of ongoing negotiations.

Talks restarted this summerWarner artists have been off YouTube since December, but the talks, led by Google's VP of content partnerships, David Eun, and Warner's digital chief, Michael Nash, restarted this summer. One exec said the delay in announcing the deal is clerical: Warner is delivering the files to YouTube, which is encoding them, a process that takes time.

As for Vevo, rather than take an equity stake in the joint venture, Warner is looking to do a non-exclusive deal and sees Vevo as part of a broader strategy for distributing ad-supported music videos on the web that may include other sites as well as its direct-to-consumer business, a network of artist sites powered by Cisco.

The Vevo talks are being held at the highest level at both Warner and Universal; if successful, Vevo would be the exclusive distributor of Universal Music and Sony videos, which is about 60% of the U.S. music market, and have non-exclusive access to Warner, which accounts for another 20%, including artists such as Green Day, Madonna and R.E.M. EMI and a coterie of indie labels account for the rest of the market.

Brand advertising is seen by the labels as a potential new vein of revenue to help offset declining CD sales and flattening out of digital music sales through stores such as Apple's iTunes. Once promotional loss leaders, the labels see music videos as potential venues for brand advertising -- and at higher ad rates: $20 to $40 to reach a thousand viewers, rather than the $5 to $10 they currently get for ads on YouTube.

Vevo's video playerVevo has a partnership with YouTube and will be built atop YouTube's architecture, but Vevo's video player will have unique features such as the ability to download lyrics, make a playlist or sync the music to user-generated video. Videos distributed by Vevo would be available on YouTube, Yahoo, MTV, as well as other sites across the web.

The prospect of Warner joining Vevo -- even on a non-exclusive basis -- is a big boost for the joint venture, scheduled for launch sometime in December. The joint venture will share revenue with YouTube for views that occur there, but it will also take a bite out of the leading video site's traffic. Views of videos distributed by Vevo will accrue to Vevo, not YouTube.

Universal videos average 24 million views and Sony videos average 13 million views a day on YouTube, according to TubeMogul. YouTube averages 1.3 billion video views per day overall, so that's nearly 3% of its total view count. That's assuming no deal with Warner or any other label before launch in December, which seems unlikely.

Vevo is hoping to make music videos a compelling proposition for advertisers by replacing grainy uploads with a more advertiser-friendly experience. The company has hired former Nokia exec David Kohl to drive that effort as global head of sales, first reported earlier this week by Allthingsd.com.